I don't really know what the Justice Department is doing apart from making up legal arguments to support the assassination/police state that no one gets to actually read. and prosecuting medical marijuana distributors, I guess.

The idea that you're going to be able to prosecute goldman sachs executives for criminal financial fraud remains one of the most annoying and time-wasting red herrings of the left

― Scott, bass player for Tenth Avenue North (Hurting 2), Thursday

Difficult but not annoying or time wasting (I'd rather have Justice working on such a criminal case even if they lose-- it's not like they're gonna be drafting other legislation to tighten up regulations on wall street or doing other more important things if they're busy on such a case). As Newsweek that well-known left-wing mag noted:

A year later, in April 2011, the Senate Permanent Subcommittee on Investigations, chaired by Democrat Carl Levin, after a two-year inquiry, issued a fat report detailing several transactions, including Goldman's Abacus deal, that Levin and his staff believed should be investigated by Justice as possible crimes. The subcommittee made a formal referral to the department (as did the federal Financial Crisis Inquiry Commission, chaired by Phil Angelides), and Levin publicly stated his view that criminal inquiry was warranted. Goldman executives, including the firm's chief executive officer, Lloyd Blankfein, started hiring defense lawyers.

The Fed is doing both. Something like 60% of Treasury issuance to pay for the continuing insane deficits (35% of Federal spending is borrowed) wound up on the Fed's balance sheet last year. It does pass through banks: the Federal Reserve is a semi-private corporation owned by member banks and chartered by a 1913 act of Congress to get around antitrust concerns.

Also, political objections (in the form of objections to Fed board nominations) have all come from the Tea Party Right of late, which is very opposed to quantitative easing as a debasement of the dollar. Kinda naive, when it did so many good things, like force China further off its peg. In the long term, QE, by debasing the dollar just transfers wealth from savers and the wealthy (ie, the 1±%) to debtors. For the 99%, its terrible if you are a pensioner but ultimately helpful if you're underwater on your mortgage.

Right, inflation is bad for savers of money and people on fixed income, good for people with debt, and kind of neutral for everyone else as long as it doesn't get out of control (all other things being equal, wages rise with inflation).

At the moment, the vast majority of prosecutable fraud from the mortgage bubble arises from "upstream" of the financial engineers at the Wall St. banks. Loan originators who falsified income documentation, appraisers who inflated appraisals to retain business, etc. A strong case can be made that only a few of the mortgage-back security aggregators really knew or care how bad the credit risks had become in the 2005-7 timeframe, so long as some fool in a Dusseldorf landesbank was willing to buy them.

William K. Black, one of the best sources on the lack of prosecution for credit-bubble fraud, IIRC notes that the majority of the white-collar crime investigators at the FBI and other Federal law enforcement agencies were reassigned to investigate money-laundering for terrorist organizations in the aftermath of 9/11. A budgetary request for more hires to replace them was nixed by Congress.

The subcommittee made a formal referral to the department (as did the federal Financial Crisis Inquiry Commission, chaired by Phil Angelides), and Levin publicly stated his view that criminal inquiry was warranted.

Anyway my gripe about that line ("why haven't these guys gone to jail?") is that actionable criminal fraud makes up a tiny portion of what went wrong with our economy, and while it is often metaphorically accurate to say "these guys are crooks", it's rarely literally provably true. Further, it seems to me that the lust for a public hanging kind of distracts from the much bigger, harder systemic problems that need addressing.

if nobody's left to run it because they're all in jail, that seems like an excellent rationale for govt seizing control. i'm not sure, but can the govt be plaintiff against banks in a civil suit? that seems like another avenue to seize assets.

Right, inflation is bad for savers of money and people on fixed income, good for people with debt, and kind of neutral for everyone else as long as it doesn't get out of control (all other things being equal, wages rise with inflation).

this is true but again, we don't really have inflation. we just have low rates, which are also good for debtors and bad for savers (but are also good for equities since it forces money [that wants returns] out of bonds and into riskier investments.). but we don't have prices increasing at a striking rate (recent episodic commodities bubble aside). and i've said this before, but i'm pretty dubious that the low rates are a result of fed policy at all, actually. There's enough demand for relatively safe assets that rates would probably be very low anyway.

Right, didn't mean to suggest we are seeing inflation, although I do think that the expanded money supply has contributed to mini-asset-bubbles. I think what it HAS maybe done is exerted enough upward pressure on prices to keep them from deflating, which is what I meant in my prior post.

That's an interesting theory about the demand for safe assets, and one I hadn't heard. But it seems like it almost has to be true that rates are lower than they would be without fed intervention. I mean the fed has spent, what, over a trillion dollars buying treasuries? And how big is the entire treasury market? 10 trillion? I can't find a clear number in my quick google search, but the additional demand added by the fed's buying would have to make a significant difference to rates, even if they'd be low anyway, I'd think.

Anyway my gripe about that line ("why haven't these guys gone to jail?") is that actionable criminal fraud makes up a tiny portion of what went wrong with our economy, and while it is often metaphorically accurate to say "these guys are crooks", it's rarely literally provably true. Further, it seems to me that the lust for a public hanging kind of distracts from the much bigger, harder systemic problems that need addressing. --Scott, bass player for Tenth Avenue North (Hurting 2)

Seriously JAIL THE BANKSTERS makes me want to throw myself off a bridge.

Ok so I know this isn't EXACTLY within the thread, but since this has kind of become the smart-people-explain-finance-related-stuff thread, can anyone explain a bit about what a Greece Euro exit would mean?

nobody really knows what a greece euro exit would mean or how it would happen at the moment, i suspect. The new 'geuro' proposal (http://www.cnbc.com/id/47505085) strikes me as not completely insane and unworkable as a medium term solution that would probably just be a step towards ultimate euro exit.

What you're hearing lately from the Powers That Be about the survivability of Greece leaving the eurozone is all about liquidity contagion. They're saying that balance sheets are arranged such that the direct financial losses are survivable. But what about fear? It's harder to assess, but anyone who's sanguine about this is either bluffing optimistically or deluded. Ground zero for fear is going to be Cyprus. Most people probably don't even know that Cyprus is an independent country at all, and if they do know anything about it what they know is that it's some kind of ethnic Greek proxy state. So if Greece is gone, so is Cyprus, which is basically part of Greece. And if one island is gone, then what about Malta? So Malta's down. Now Cyprus and Malta matter even less than Greece. But once the policy rule isn't "Greece is different" but "Greece and Malta and Cyprus are all different" then who really knows. Does anyone even know anything about Portugal? Again, not really. Except it's close to Spain! And so now Spain's melting down. Not because of losses on Greek debt, but because the Greek exit and subsequent collapse of Cyprus have us new information about the limits of the German political class' level of commitment to the eurozone and now everyone's alarmed.

The only way to halt the pattern is to provide some very clear and very salient informational point separating the countries that are exiting from the countries that aren't exiting. And that's hard to do.

Like this. Not very convincing. Whose fear are we talking about? The American public? The German public? Institutional bond investors?